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Gov. Jerry Brown built his budget on the hope of voters passing a multibillion-dollar tax hike in November, but the nonpartisan Legislative Analyst's Office raised questions about his treatment of education funding in a new report issued today.

The governor has said that if voters reject his tax hike on upper-income taxpayers and sales, schools would face mid-year cuts equal to eliminating three weeks of instruction.

The analyst's office said that in order to cut school funding that much, the governor would have to pursue "risky" budget maneuvers that raise serious policy questions. Beyond that, the analyst warned that districts will find it difficult to absorb a roughly 5 percent mid-year program cut and may need special ability to lay off teachers after the November vote.

Brown has political motivation to put education funding on the line in the November election - polls show voters list it as their top priority. While it is true that education takes roughly 40 percent of the state budget - and any revenue loss would thus have to fall partly on schools - the governor's plan may run into problems with the constitution and education groups.

SCHOOL FUNDING CUT

We explained some of the budget maneuvers that Brown would rely upon in our Saturday story on Proposition 98, the voter-approved constitutional guarantee for K-12 and community college funding. The Analyst's Office raised concerns about the governor proposing to go down this road if the taxes fail.

To cut schools in that instance, the state would have to count $2.6 billion of school bond debt toward meeting the state's obligation for education funding. That hasn't been done before, and it would have the net effect of crowding out $2.4 billion in classroom funding - or Brown's "three weeks of school."

The LAO said it has "serious policy concerns" with this maneuver, which Sen. Joe Simitian, D-Palo Alto, called "a pretty big gimmick" in our story. For starters, the analyst's office said, bond debt payments are volatile on an annual basis, ranging anywhere from 0.5 percent to 5.1 percent of school funding since 1988. That adds another layer of instability to an already complicated education funding system.

Education groups have already said they would consider suing if the state pursued this course.

"Absent a clear, compelling policy rationale, we question why the state would want to change its longstanding education facility funding practices, particularly when the change results in a significant reduction in funding for school and community college operations," the analyst's report says.

If the tax initiative fails, the governor also proposes to renege on a 2011 deal with the education community to hold schools harmless for shifting $5 billion in sales tax dollars to counties. This shift will cost K-12 schools and community colleges $1.7 billion, according to LAO, which called it "risky."

Alternatively, the analyst's office said lawmakers could reduce this money by suspending Proposition 98. But as we pointed out Saturday, Brown and Democrats believe it will be difficult to do that because of the political downside of not "fully funding" schools, as well as the need to get votes from reluctant Republicans.

SCHOOL PLANNING

Brown is working with education groups to devise ways to absorb cuts if his tax proposal fails. The governor wants districts to cut only after they learn what voters decide on the tax vote.

But the analyst's office has pointed out that districts are more likely to cut ahead of the school year. They typically budget conservatively, plus current law requires them to begin layoff proceedings before school starts. Teachers unions don't want that to happen since layoffs would be unnecessary if the tax plan passes. But district officials may have few cost-cutting methods at their disposal after the November vote.

In its report, the analyst's office advised districts to plan ahead for "trigger" reductions and not to budget optimistically. It said the Legislature should be deliberate in telling districts what would happen to education funding if the taxes fail.

The analyst likes the governor's proposal to spend $2.4 billion of new tax dollars, if voters approve, on buying down past borrowing rather than expanding school programs. Though it means 2012-13 will be a lean year for schools regardless, it also would soften the mid-year pain for schools if the taxes fail.

The analyst recommended a few ideas for dealing with potential K-12 cuts, many of which undoubtedly will be unpopular among teachers and parents: allowing districts to reduce the school year below 175 days; suspending caps on classroom size for one year, presumably saving by having fewer teachers; reducing earmarks; and giving districts a "special" post-election layoff window.

At community colleges, the analyst recommends that lawmakers consider: suspending requirements on how many faculty members must be full time; allowing more classroom dollars to pay for support staff like counselors and librarians; or allowing for a post-election layoff window.



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